From Traderpedia

A security that is not listed or traded on an exchange, usually due to an inability to meet listing requirements, or for reasons of flexibility e.g. a spread bet.

The over-the-counter, or OTC, market is where transactions are made outside the exchange system. In some cases the transactions are specialized, as is often the case in the forward and swaps arenas. In other cases, the nature of the market is such that a centralized exchange is not optimal, as in foreign exchange. In some circles (such as foreign exchange and fixed income) this is referred to as the inter-bank market.

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